Canada: Monopolisation

Canadian antitrust enforcement is based on three core provisions: conspiracy, mergers and abuse of dominance. The abuse of dominance provisions, found in sections 78 and 79 of Canada’s Competition Act,1 are administered and enforced by the federal government through the commissioner of competition (the commissioner), the head of the Competition Bureau (the Bureau). The commissioner investigates allegedly anti-competitive conduct and, where grounds exist, brings a case before the Competition Tribunal (the Tribunal) for adjudication. Although there has been some discussion of creating a private right of action for abuse, the commissioner retains exclusive jurisdiction to challenge allegedly abusive conduct before the Tribunal. Recent amendments to the Act empowered the Tribunal to award monetary penalties of up to $15 million for multiple violations of the abuse provisions.

There is currently a highly active enforcement environment in Canada. The commissioner has increased enforcement of all aspects of the Act since taking office in 2009, challenging several mergers,2 pursuing misleading advertising claims,3 continuing to combat global and domestic cartels,4 and launching two abuse of dominance actions,5 among others. As described in more detail below, one of the abuse actions was settled, while the second is also more likely than not to settle. As a consequence, it is unlikely that there will be an opportunity in the near term for the Tribunal to apply the Federal Court of Appeal’s (FCA) 2006 decision in Commissioner of Competition v Canada Pipe Company Ltd,6 which was the first case in which any Canadian court had interpreted the abuse of dominance provisions. The FCA’s decision remains the leading word on the matter, as the Supreme Court of Canada declined to hear an appeal of the matter,7 and the commissioner and the parties settled the matter rather than returning to the Tribunal for a rehearing in light of the FCA’s decision.8

Recent developments

In February 2010, after three years of discussions and several months of negotiations, the commissioner commenced abuse of dominance proceedings against the Canadian Real Estate Association (CREA), claiming that CREA was abusing its dominance in the market for residential real estate brokerage services.9 CREA owns, and its members operate, an online database (MLS) featuring homes for sale across Canada. The commissioner alleged that CREA’s restrictive rules governing access to the database lessen or prevent competition substantially by excluding competition from brokers and others wishing to offer a reduced set of services to customers. Although CREA offered to modify its rules following the filing of the application, the commissioner was not satisfied with the proposed rule changes as they did not prevent CREA from making future rule changes that would undercut the proposed changes. The commissioner continued with the application, which was scheduled to be heard by the Tribunal in April 2011.

However, in October 2010, the Bureau announced that the proposed settlement of its investigation into the practices of CREA had been approved by CREA members. The following day, a consent agreement reflecting the terms of the settlement was registered with the Tribunal. Under the settlement, which has a 10 year term, CREA will eliminate its ability to adopt anti-competitive rules that discriminate against real estate agents hired to perform limited functions, such as merely posting a listing on MLS. The settlement of this case is consistent with the commissioner’s pledge not only to launch cases when necessary, but also to settle them when appropriate.

The CREA settlement opened up the MLS system somewhat, but realtors offering alternative fee structures still faced restrictions at the local real estate board level on the type of information they could make readily available to the public. In May 2011, the commissioner commenced an abuse of dominance case against the Toronto Real Estate Board (TREB), the largest such board in Canada. The commissioner alleges that TREB is restricting how its member agents can provide information from the Toronto MLS system to their customers, thereby denying member agents the ability to provide innovative brokerage services over the internet. The Toronto MLS system contains data about previous listing and sale prices, historical prices for comparable properties in the area, and the amount of time a property has been on the market. The commissioner’s complaint is that due to TREB’s restrictive practices, agents do not have the flexibility to share this important data with customers in innovative new ways, such as through password protected websites, also called Virtual Office Websites (VOWs), which permit a customer to search a full inventory of listings containing up-to-date data online, before making the decision to tour a home or attend an open house.

TREB has not yet filed its response to the commissioner’s application, but in late June 2011 it proposed a new policy to permit agents to operate VOWs. It claimed that it had been working on the policy when the Bureau launched its application. The commissioner publicly indicated that she was not satisfied by TREB’s response, for reasons similar to those in the CREA case: without a legally binding undertaking or consent agreement with the commissioner, TREB could repeal its policy and resume its anti-competitive behaviour.10 The commissioner subsequently amended the notice of application to include an analysis of the proposed VOW policy, noting that its adoption would also be an anti-competitive act.11 Given the willingness of TREB to adopt a VOW policy, and the expense involved in a contested tribunal proceeding, it would not be surprising for this case to follow the CREA case and for a settlement to be reached.

In January 2009, the Bureau revised its enforcement guidelines on the abuse of dominance provisions, issuing a draft for public consultation in January 2009.12 The Draft Guidelines reflect developments in case law and economic thinking since the original guidelines were published in 2001.13 Generally speaking, there were no major changes to the enforcement framework for single-firm abuse of dominance. However, in the discussion of joint dominance, the Draft Guidelines no longer suggest that the commissioner will need to demonstrate any coordinated conduct between the parties to ground a case of joint dominance. Rather, two or more firms who engage in similar anti-competitive conduct and who hold market power could be considered jointly dominant. In addition, the Draft Guidelines present new or expanded discussions of certain key concepts in assessing whether a party or parties have engaged in anti-competitive conduct. Although the (then) interim commissioner indicated that the Draft Guidelines would be finalised after a round table of leading experts from the private and public sectors was convened in September 2009,14 as of mid-2011 they still remain in draft form. It is expected that following the resolution of the CREA case, the Bureau will move to finalise them in the near-term although no firm date has yet been indicated by the Bureau.

Consistent with this proposed new approach to joint dominance, in June 2009, the commissioner secured a consent agreement with two waste services firms in British Columbia that the commissioner believed were engaged in joint abuse of dominance. The commissioner alleged that the firms, which held a greater than 80 per cent market share, engaged in similar anti-competitive contracting practices that resulted in substantially less competitive markets for commercial waste collection services. The firms agreed to revise their contracts and to refrain from engaging in such conduct for seven years.15 Of significant interest is the fact that there is nothing in the public version of the consent agreement that suggests there was any coordination or agreement between the two firms.

Also in 2009, the commissioner gained a considerable new enforcement tool when amendments to the Competition Act empowered the Tribunal to impose an administrative monetary penalty (AMP) against a person found to have engaged in an abuse of dominance. The Tribunal may now impose an AMP of up to C$10 million for a first breach of the section, and up to C$15 million for each subsequent breach, with the amount to be determined by reference to a number of prescribed criteria.16 In addition, the amendments repealed the airline-specific abuse of dominance provisions as well as the criminal prohibitions on price discrimination, promotional allowances, and predatory pricing.17 The expectation is that each of these potential anti-competitive behaviours will now be pursued using the general abuse of dominance provisions.

The law and its goals

Objectives of the abuse of dominance provisions

Although Canada’s first antitrust law was introduced in 1889, the present civil abuse of dominance provisions were added when the Competition Act was significantly revised in 1986.18 At that time, the federal government issued a guide to the new Competition Act, in which it explained the objectives of the abuse provisions as follows:

Anti-competitive behaviour on the part of dominant firms imposes artificial restraints on the competitive process, impeding the market from efficiently allocating resources. In a healthy, dynamic economy, goods and services are supplied by the firms which can produce them most efficiently and adapt to the ever-changing demands of the marketplace. The proposed abuse of dominance provision will ensure that dominant firms compete with other firms on merit, not through the abuse of their market power. The provision is of particular importance for the protection of consumers, new entrants and, in particular, the small business community.19

The Tribunal has cited these objectives with approval,20 while the FCA noted that all of the objectives found in the purpose clause in section 1.1 of the Competition Act must be reflected in the abuse analysis.21 Given the competing nature of some of the objectives found in section 1.1 of the Competition Act, it remains to be seen how these will be reconciled in future cases.

Elements of the abuse of dominance provisions

Canada’s abuse of dominance law is generally similar to that of the US and that of the EU, in that simply possessing a dominant or monopoly position in the relevant market is not sufficient to attract liability. In order to violate these provisions, each jurisdiction requires anti-competitive conduct in combination with monopoly power that results in harm. The concept of attempted monopolisation, which is prohibited in the US, is not recognised in Canada.

In Canada, abuse of dominance is a civil reviewable matter, meaning that there is no liability until the Tribunal actually makes a finding that abuse of dominance has occurred. The provision is for general application to all sectors of the economy, a fact underscored by the recent repeal of special provisions designed to address abuse of dominance by a domestic airline.22 Notwithstanding this, the Bureau has issued guidelines outlining the potential application of the provision to the Canadian grocery sector,23 as well as an information bulletin on applying these provisions to the telecommunications industry.24

Under section 79, the commissioner must prove three elements on a balance of probabilities before the Tribunal may make an order proscribing the behaviour or imposing an AMP:

  • one or more persons substantially or completely control, throughout Canada or any area thereof, a class or species of business;
  • that person or those persons have engaged in or are engaging in a practice of anti-competitive acts; and
  • the practice has had, is having or is likely to have the effect of preventing or lessening competition substantially in a market.25

Section 78 sets out a lengthy and non-exhaustive list of ‘anti-competitive acts’.

It is important to note that section 79 specifies three distinct elements. The FCA in Canada Pipe stressed that in abuse of dominance cases the Tribunal must avoid the ‘interpretive danger of impermissible erosion or conflation of the discrete underlying statutory tests’26 and applied a formalistic approach to the determination of each element. At the same time, the FCA did acknowledge that the same evidence is often relevant to more than one element.27

Dominance

The first element of abuse of dominance in Canada is that a firm or firms must have a dominant market position, that is, substantially or completely controlling a class or species of business. The term ‘control’ has been found to be synonymous with market power.28 A firm ‘controls or substantially controls a business’ if it possesses market power, namely, the power to profitably set prices above competitive levels for a considerable period of time.29 The Bureau generally considers one year to be a ‘considerable’ period of time in the abuse context.30 This determination requires that relevant anti-trust markets be defined and that their structure, barriers to entry, and the significance of market shares be examined. The Tribunal’s approach in abuse cases is to consider market definition and then market control.31

In measuring market power, the Tribunal and the FCA in Canada Pipe have accepted that there can be direct and indirect approaches to establishing this element.32 The direct approach proves that prices are above some accepted competitive level. The indirect approach considers other indicia of market power such as market share, entry barriers and the countervailing power of customers.33 The indirect approach is most often used because of the difficulty of determining a benchmark for competitive price.

Market definition

The assessment of market power starts with the definition of the relevant markets. The phrase ‘class or species of business’ has been determined to be ‘synonymous with the relevant product market’34 and ‘the fundamental test or touchstone for determining the boundaries of the relevant product market is substitutability’.35 In accepting this economic approach to product market definition, the Tribunal has rejected a more commercial or non-economics based approach that might have focused on what firms believed were the necessary elements for the performance or conduct of the business.36

The phrase ‘throughout Canada or any part thereof’ in section 79 has been held to refer to the ‘geographic market’.37 To define the relevant geographic market, the Tribunal has adopted an approach similar to product market determination, namely, to identify the universe of effective competitors or substitute providers of a product through such economic theories as the hypothetical monopolist paradigm.38

It is important to note that the reference to ‘throughout Canada or any part thereof’ means that section 79 only applies to firms that are dominant within Canada. The jurisdictional limitations of section 79 were inherited from the conversion of the former criminal monopoly provisions into the current non-criminal reviewable abuse of dominance provisions. In the criminal context, monopoly provisions could only be applied within the boundaries of Canada.

The role of market share

Canada’s abuse of dominance law relies on market share as evidence of market power or dominance. A prima facie determination of market power may be made on the basis of market share in the relevant market.39To date, there is no specific market share threshold for prima facie market power. All of the contested abuse cases thus far have concerned market shares in excess of 80 per cent, where a prima facie case was relatively obvious. But Canadian cases have found that ‘no prima facie finding of dominance would arise’ with respect to a market share below 50 per cent,40 and a 25 per cent market share ‘falls well short of a level that might be considered to indicate market power’.41

Notwithstanding these pronouncements by the Tribunal, from an enforcement perspective, the Bureau takes the position that a market share held by one firm in excess of 35 per cent may prompt further investigation; in the case of a group of firms acting jointly, a combined market share over 60 per cent may also raise concerns.42 Above this level, the Bureau has stated that it will investigate further whether an entity is dominant. The same point was made in the Bureau’s Predatory Pricing Enforcement Guidelines.43

However, it is important to note that the case law is clear that although market share is important to the abuse analysis, a finding of market power must be supported by findings other than market share, such as the existence of barriers to entry, the number and effectiveness of competitors, excess capacity and the state of the market.44 Where barriers to entry are non-existent, even a very large market share will not support a finding of market power.45

Anti-competitive conduct

The FCA’s decision in Canada Pipe dealt extensively with this element, and although much of the Tribunal’s analysis from previous cases remains relevant, the FCA’s decision could represent some significant shifts in the assessment of anti-competitive acts in future cases. In general, it remains that once dominance is established, it is necessary to consider the nature and frequency of the conduct in question. To be liable under section 79, a firm must have engaged in a ‘practice’ of anti-competitive acts. A ‘practice’ denotes more than an ‘isolated act’.46 Moreover, different types of individual anti-competitive acts taken together may constitute a practice.47

It is acknowledged that the more difficult task is in defining an ‘anti-competitive act’.48 Section 78 provides a list of illustrative examples of what may constitute anti-competitive acts for the purpose of determining whether an abuse of dominance has occurred. The list of anti-competitive acts in section 78 is not exhaustive49 and, in fact, the Tribunal has effectively expanded the list in its decisions. Recently, the Bureau released new guidelines concerning predatory pricing which indicated that predatory pricing behaviour, although also criminalised under the Competition Act at the time, would initially be examined under the abuse of dominance provisions.50 As noted above, following the 2009 repeal of the criminal predatory pricing, promotional allowances and price discrimination provisions, it is expected that similar conduct that has an anti-competitive effect because it is engaged in by a dominant firm will be pursued by the commissioner under the abuse provisions.

From an enforcement perspective, the Bureau’s Abuse of Dominance Guidelines51 indicate that during an investigation, the Bureau is likely to consider an activity to be anti-competitive if it:

  • raises competitors’ costs, reduces their revenues or prevents their access to key inputs or facilities;
  • concerns predatory conduct, particularly in a market with high barriers to entry; or
  • facilitates the ability of groups of large firms which may together have joint dominance to monitor each other in order to maintain or increase price levels.

Although section 78 was an attempt to define acts that could constitute abuse, it has been of limited use because, in practice, it is often difficult in abuse cases to distinguish between when an act is anti-competitive and when it is a sign of healthy or normal commercial competition. For example, the Tribunal has acknowledged that its decisions to restrict competitive actions on the grounds that a competitor feels a dominant firm’s response has been ‘overwhelmingly intense’ may actually chill competition.52 But it may be that this balance has shifted somewhat as a result of the FCA’s Canada Pipe decision, where now the applicable standard is whether the impugned conduct is merely intended to have a ‘negative effect on competitors’.53

In general, in Canada Pipe, the FCA appears to adopt the approach of the Tribunal54 by holding that anti-competitive acts under section 78 are defined by their common purposes: the intention of a negative predatory, exclusionary or disciplinary effect on a competitor.55 An act’s purpose can also be described as its ‘overall character’. In evaluating ‘purpose’, the FCA generally adopted the approach of the Tribunal in previous cases and accepted that the relevant factors to consider include the reasonably foreseeable or expected objective effects of the act; and subjective intent, which, while not required, is considered informative.56

In order to establish whether an act was undertaken for an anti-competitive purpose, it is not necessary for the commissioner to prove a subjective intent to restrict competition.57 Anti-competitive purpose can generally be inferred from the nature of the act itself because the ‘respondent will be deemed to intend the effects of its actions’.58 Furthermore, the mere proof of some legitimate business purpose is not sufficient to overcome other indicia of anti-competitive acts.59

Therefore, although subjective intent is not required, intention remains an important element within subsection 79(1)(b) in determining the intended purpose of the act in question. When proving the intended nature of the negative effects on a competitor, the Tribunal may do so directly through subjective intent or indirectly by reference to the ‘reasonably foreseeable consequences’ of the act and the surrounding circumstances, or both.60

In what appears to be a shift from previous Tribunal approaches, the FCA held that there must be a complete de-linking between the assessment of whether an act is anti-competitive and its impact on competition.61 In Canada Pipe, the FCA emphasised that the sub-section dealing with anti-competitive acts is concerned with an act’s effect on a competitor, not necessarily on competition: that is, a practice may be an anti-competitive act under subsection 79(1)(b) without resulting in a substantial lessening or prevention of competition under subsection 79(1)(c). The FCA found that a practice need not cause decreased competition, nor cause detriment to the consumer to be an anti-competitive act.62 Instead, the focus of analysis is on the purpose of the act in question regarding competitors.

It will remain to be seen in practice what conduct could be engaged in by a dominant firm that would not be found to have a ‘negative’ effect on a competitor that is not, for example, exclusionary. In many contexts, competitive and healthy competition entails acting to win business from competitors, which will necessarily have a negative effect on them and which necessarily implies that the competitor has been excluded from that same business opportunity.

A valid business justification may also provide an alternative explanation for the conduct in question and challenge the deemed intent behind the purpose of an act that resulted in anti-competitive effects.63 In Canada Pipe, the FCA clarified the requirements for a valid business justification, stating that it must provide a ‘credible efficiency or pro-competitive explanation, unrelated to an anti-competitive purpose, for why the dominant firm engaged in the conduct alleged to be anti-competitive’.64 For example, the FCA did not accept ‘improved consumer welfare’ as a valid business justification. The court stresses that, although important, the justification does not possess an independent role. It remains pertinent and probative only in relation to whether the act was performed for a ‘predatory, exclusionary or disciplinary negative effect on a competitor’.65 Therefore, it may only counter evidence of anti-competitive purpose and remains a factor to balance within subsection 79(1)(b).66

The Competition Bureau offered its views on what a valid business justification must be in the Draft Guidelines. The Bureau explains that such a rationale, ‘without limiting its scope, will often comprise activities that minimize costs of production or operation, independent of the elimination or discipline of a rival; or activities that improve a firm’s product, service, or some other aspect of the firm’s business.’ However, if the cost savings can be achieved in an equally effective manner other than through the allegedly anti-competitive behaviour, the Bureau will not consider there to be a valid business justification.67

Again, it will be interesting to see in future cases how, in practice, one will be able to show that an act has a valid business justification that is either efficient or pro-competitive, if one is precluded from justifying it on the basis of improved consumer welfare. Many would argue that the ultimate benefit and value in efficiency and pro-competitive conduct is, in fact, to be reflected in improved consumer welfare.

Competitive effects

The final element that must be proven before the Tribunal can make an order under subsection 79 is that the practice of anti-competitive acts has resulted or is likely to result in a substantial lessening or prevention of competition (SLC).

In assessing the effects on competition, the FCA in Canada Pipe observed that subsection 79(1)(c) requires an approach that emphasises comparative and relative considerations in respect of three specified time frames: past, present and future.68 Assessing an SLC requires a relative assessment rather than an absolute one: did the impugned practice result in a preventing or lessening of competition compared with the conditions governing in the absence of the practice, and was this lessening of a degree sufficient to be considered substantial?69To accomplish this comparative interpretation, the FCA in Canada Pipe adopted a ‘but for’ test: ‘would the relevant markets - in the past, present, or future - be substantially more competitive but for the impugned practice of anti-competitive acts?’70 The FCA supports the use of the ‘but for’ test by referring to its use in the Abuse of Dominance Guidelines as well as excerpts from previous Tribunal decisions.71 Also, the FCA highlighted the interpretation of earlier abuse of dominance cases where the Tribunal adopted tests comparable to the ‘but for’ test.72

Concluding that the ‘but for’ test is a correct approach, the FCA also left open the possibility that the Tribunal may consider other appropriate tests in future abuse of dominance cases.73 The court, however, held that although the ‘but for’ test is not necessarily the only test the Tribunal may use to establish an SLC, the requirements mandated by the statutory language of subsection 79(1)(c) demand that the Tribunal consider it. But the FCA went on to hold that whatever methodology the Tribunal chooses in any particular case, it must be ‘reflective of all the different objectives of the Act’.74 Although this may be a laudable objective, the difficulty lies in the fact that, in practice, this is very difficult as the Act’s objectives are often virtually irreconcilable in any particular case.

It is in this area that the FCA’s decision in Canada Pipe may have the most important implications. In general, the FCA’s decision holds that the strict focus of section 79 is to preserve competition in a market on a relative basis rather than an absolute basis. With what appears to be such a formal and strict approach, it will remain to be seen how many other acts would be caught by section 79. This is because the commissioner has to show both an intended negative effect on a competitor and a relative substantial lessening of competition even though it may be that the market, in fact, remains competitive. Also, it will be interesting to see if in future cases this type of analysis will, in practice, essentially shift the onus from the commissioner to the dominant party to prove the merit of its conduct.

Joint dominance

Although the vast majority of abuse of dominance cases concern the exercise of unilateral market power, the concept of joint abuse of dominance or shared monopoly by a group of unaffiliated firms also exists under subsection 79(1). However, the concept of joint dominance has received only a small amount of judicial consideration.

Consequently, it has not been clearly defined to what extent the relationship between unrelated parties may constitute a joint abuse. In these cases, in order to establish dominance, it must be shown that one or more firms control or have joint market power.Although it is unclear what type of relationship between parties would be contrary to section 79 in a joint abuse case, the Bureau has stated in its Abuse of Dominance Guidelines that it will not pursue cases under the abuse provisions that are merely examples of ‘conscious parallelism.’75 (Whether uncoordinated conduct undertaken by more than one party could be addressed under section 77 of the Competition Act, which deals with tied selling, exclusive dealing and market restriction, where it is ‘widespread’ in a market, remains at least a legal possibility under the Act.) The Bureau has noted in its Strategic Alliances Bulletin that inter-firm cooperative arrangements may be open to review under abuse of dominance as well as the merger and conspiracy provisions.76

However, the Bureau’s approach appears to have shifted with the release of the Draft Guidelines in 2009 and the waste services consent agreement referenced above. The Draft Guidelines no longer refer to the need to demonstrate coordination between the parties, with the result that two firms, neither of which would be considered dominant on its own, could be found to have engaged in joint dominance merely for engaging in a practice that is common in the industry. Various commentators have called upon the Bureau to clarify its approach to joint dominance when the Draft Guidelines are finalised.77

Remedies

As indicated above, abuse of dominance is a non-criminal reviewable practice, and only the commissioner can commence a proceeding before the Tribunal to obtain a remedial order. Before commencing litigation, the commissioner’s policy is to approach the firm engaging in the conduct under investigation in order to seek a voluntary change in behaviour.78 Parties affected by the abusive conduct may only recover damages under the Competition Act if the party found to have engaged in abusive conduct breaches the remedial order issued by Tribunal. This is because such a breach is considered to be a criminal offence punishable by fine or imprisonment or both, and breaches of the criminal provisions of the Competition Act give rise to a statutory right of private action for single damages.

Once the Tribunal finds that a party has contravened section 79, it may issue an order under subsection 79(2) prohibiting the abusing parties from continuing the anti-competitive acts. If, on the other hand, the Tribunal concludes that a prohibition order is not likely to restore competition, it may make any other order against the dominant parties that is reasonable and necessary to overcome the effects of the practice of anti-competitive acts, such as an order that assets or shares be divested or that terms of a contract be rendered unenforceable.79 The term ‘may’ in subsection 79(2) provides the Tribunal some discretion to refuse to issue an order even though it has found there has been an abuse of dominance.80 But the exercise of the Tribunal’s discretion in this manner would be rare.81

As noted above, amendments made to the Competition Act in 2009 now permit the Tribunal to impose significant monetary penalties on those who are found to have engaged in abuse of dominance. The maximum AMP is C$10 million for a first violation and C$15 million for subsequent violations. The Bureau has not yet issued any guidance on when it shall seek an AMP and in what amount. It is hoped that this information will be provided when the Draft Guidelines are finalised.

Section 79 also sets out several specific circumstances in which the Tribunal is not entitled to issue an order. These include where:

  • the act in question is engaged in pursuant only to the exercise of an intellectual property right (in Canada, compulsory licensing is generally not a remedy available to the Tribunal under the abuse provisions of the Competition Act, but it is possible under section 32 for the attorney general to seek a compulsory licensing remedy in certain rare circumstances);82
  • the practice of anti-competitive acts occurred more than three years before the commissioner’s application;83 and
  • an application has already been brought based on the same or substantially the same facts pursuant to the Competition Act’s conspiracy or merger provisions.84

In the event that the Tribunal decides to issue an order, its terms may affect only the rights of the dominant parties against whom the order is directed or any other person affecting it to the extent necessary to achieve the purpose of the order,85 and it must adopt ‘the least intrusive course of action’.86 The Tribunal, however, has ‘broad jurisdiction to interfere with property rights not only of the party or parties before it but also of third parties who have contracts with the respondent’.87

For the moment, Canada’s law on abuse of dominance appears relatively settled in the courts, but remains the subject of ongoing policy debates. The introduction of AMPs and questions about joint dominance remain to be settled and are expected to be addressed through continuing consultations and the conclusion of the updated enforcement guidelines.

Notes

1
Competition Act, RSC 1985, c C-34 as amended (hereinafter Competition Act or Act).

2
Commissioner of Competition v CCS Corporation, Complete Environmental Inc, Babkirk Land Services Inc, Karen Louise Baker, Ronald John Baker, Kenneth Scott Watson, Randy John Wolsey, and Thomas Craig Wolsey, CT-2011-002, and The Commissioner of Competition v Air Canada, United Continental Holdings Inc, United Airlines Inc, and Continental Airlines Inc, CT-2011-004.

3
The Commissioner of Competition v Rogers Communications Inc, Ontario Superior Court of Justice file no. CV-10-8993-00CL, and The Commissioner of Competition v Bell Canada, Bell Mobility Inc and Bell Expressvu Limited Partnership, CT-2011-005 (Consent Agreement).

4
For example, 13 individuals and six companies have pleaded guilty in the Competition Bureau’s investigation of price fixing in the retail gasoline industry in Quebec (see eg, www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03382.html), and in May 2011, Kason Industries Inc pleaded guilty to charges in connection with a customer allocation conspiracy in the sale of refrigeration and food service equipment components in Canada and the United States (see www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/02644.html).

5
The Commissioner of Competition v The Canadian Real Estate Association, CT-2010-002 and The Commissioner of Competition v The Toronto Real Estate Board, CT-2011-003.

6
Commissioner of Competition v Canada Pipe Company Ltd 2006 FCA 233, [2006] FCJ No. 1027 (hereinafter Canada Pipe).

7
2007 CanLII 16765 (SCC).

8
See Competition Bureau reaches agreement with Canada Pipe Company Ltd, Competition Bureau News Release (Ottawa, 20 December 2007), available online at www.competitionBureau.gc.ca/eic/site/cb-bc.nsf/eng/02548.html.

9
Commissioner of Competition v The Canadian Real Estate Association, Notice of Application, CT-2010-002 (filed 8 February 2010).

10
See Steve Ladurantaye, ‘Toronto Real Estate Board aims to ease competition concerns,’ Toronto Globe & Mail (June 24, 2011), available at www.theglobeandmail.com/report-on-business/economy/housing/toronto-real-estate-board-policy-takes-aim-at-competition-concerns/article2074147/.

11
The Commissioner of Competition v The Toronto Real Estate Board, CT-2011-003, Amended Notice of Application.

12
Competition Bureau, Updated Enforcement Guidelines on The Abuse of Dominance Provisions (Sections 78 and 79 of the Competition Act) Draft for Public Consultation (January 2009), online at www.competitionBureau.gc.ca/eic/site/cb-bc.nsf/eng/02942.html (hereinafter Draft Guidelines).

13
Competition Bureau, Enforcement Guidelines on the Abuse of Dominance Provisions (July 2001), online at: www.competitionBureau.gc.ca/epic/site/cb-bc.nsf/vwapj/aod.pdf/$FILE/aod.pdf (hereinafter Abuse of Dominance Guidelines).

14
Speaking Notes for Melanie L Aitken, interim commissioner of competition, to the Canadian Bar Association, Competition Law Section, 2009 Spring Forum (Toronto, 12 May 2009), online at www.competitionBureau.gc.ca/eic/site/cb-bc.nsf/eng/03066.html.

15
Commissioner of Competition v Waste Services (CA) Inc and Waste Management of Canada Corporation, Consent Agreement, CT-2009-00 (filed June 2009).

16
Competition Act, supra note 1, subsections 79(3.1) and (3.2). The criteria include the effect of the conduct on competition, the gross revenues from sales generated by the conduct and the party’s history of compliance with the Competition Act.

17
These provisions were found in subsections 78(1)(j) and (k), and sections 50 and 51, respectively, of the Competition Act.

18
Before 1986, monopolisation was a criminal offence. The criminal prohibition against monopolies was originally enacted in 1910 (Combines Investigation Act chapter 9, subsection 2(c), 1910 SC) but it was seldom enforced. Between 1910 and 1986, only 11 prosecutions were brought.

19
Consumer and Corporate Affairs Canada, Competition Law Amendments: A Guide (Supply and Services Canada, December 1985) at 2 1.

20
See eg, Commissioner of Competition v Canada Pipe Company Ltd 2005 Comp Trib 3 at paragraph 7. See also Canada (Director of Investigation and Research) v D & B Companies of Canada Ltd (1995), 64 CPR (3d) 216 at 222-223 (hereinafter D&B Companies of Canada).

21
See Canada Pipe, supra note 2 at paragraph 48. The purpose clause of the Competition Act is somewhat broader, and states that: ‘The purpose of this Act is to maintain and encourage competition in Canada in order to promote the efficiency and adaptability of the Canadian economy, in order to expand opportunities for Canadian participation in world markets while at the same time recognizing the role of foreign competition in Canada, in order to ensure that small and medium-sized enterprises have an equitable opportunity to participate in the Canadian economy and in order to provide consumers with competitive prices and product choices.’

22
Budget Implementation Act, 2009, 2009 , c 2, s 427 repealed subsections 78(1)(j) and (k) of the Competition Act, effective 12 March 2009.

23
The Bureau has issued an information bulletin entitled ‘The Abuse of Dominance Provision (sections 78 and 79 of the Competition Act) as applied to the Canadian Grocery Sector’ (November 2002), online at http://strategis.ic.gc.ca/pics/ct/ct02465e.pdf.

24
Information Bulletin on the Abuse of Dominance Provisions as Applied to the Telecommunications Industry (6 June 2008), online at www.competitionBureau.gc.ca/epic/site/cb-bc.nsf/en/02690e.html.

25
Competition Act, supra note 1 at subsection 79(1).

26
Canada Pipe, supra note 2 at paragraph 28.

27
Canada Pipe, supra note 2 at paragraphs 27-28.

28
Commissioner of Competition v Canada Pipe Company Ltd 2006 FCA 236, at paragraph 10 (hereinafter Canada Pipe Cross). See also Canada Pipe, supra note 2 at paragraph 65.

29
Canada Pipe Cross, ibid, at paragraph 52. See also Canada (DIR) v NutraSweet Co (1990), 32 CPR (3d) 1 at 28 (Competition Tribunal) (hereinafter NutraSweet).

30
Abuse of Dominance Guidelines, supra note 8 at 13-14.

31
Canada Pipe, supra note 2 at paragraph 53.

32
Canada Pipe, supra note 2 at paragraph 122.

33
Canada Pipe, supra note 2 at paragraph 122.

34
The Tribunal in both Canada (DIR) v Laidlaw Waste Systems Ltd (1992), 40 CPR (3d) 289 (hereinafter Laidlaw) and NutraSweet, supra note 24, made an interpretation of subsection 79(1)(a) in which the Tribunal in D&B Companies of Canada, supra note 15, agreed that: ‘Paragraph (a) specifically divides the two dimensions of a market: class or species of business refers to the relevant product market and throughout Canada or any area thereof to the relevant geographic market.’

35
Canada Pipe Cross, supra note 23 at paragraph 12. See also Canada (DIR) v Tele-Direct (Publications) Inc (1997), 73 CPR (3d) 1 at 35 (Competition Tribunal) (hereinafter Tele-Direct).

36
See eg, D&B Companies of Canada, supra note 15 at 224-25.

37
Canada Pipe Cross, supra note 23 at paragraph 10. Tele-Direct, supra note 30 at 33. See also D&B Companies of Canada, supra note 15 at 232.

38
Laidlaw, supra note 29 at 317.

39
Canada Pipe, supra note 2 at paragraph 138. See also Canada Pipe Cross, supra note 23 at paragraph 24.

40
Laidlaw, supra note 29 at 317.

41
See Tele-Direct, supra note 30 at 217. See also Abuse of Dominance Guidelines, supra note 8.

42
Abuse of Dominance Guidelines, supra note 8 at 15. Note however that the Draft Guidelines, supra note 7, increase the safe harbour for joint dominance to 65 per cent.

43
Predatory Pricing Enforcement Guidelines at 10, available online at: www.competitionBureau.gc.ca/eic/site/cb-bc.nsf/eng/02713.html (hereinafter the Predatory Pricing Enforcement Guidelines).

44
Canada Pipe, supra note 2 at paragraph 138.

45
Canada Pipe, supra note 2 at paragraph 138.

46
Canada Pipe, supra note 2 at paragraph 60. See also Tele-Direct, supra note 30 at 211.

47
Canada Pipe, supra note 2 at paragraph 69. See also NutraSweet, supra note 24 at 35.

48
Canada Pipe, supra note 2 at paragraph 171.

49
Canada Pipe, supra note 2 at paragraph 63. See also D&B Companies of Canada, supra note 15 at 257.

50
Predatory Pricing Enforcement Guidelines, supra note 38.

51
Supra note 8.

52
Canada Pipe, supra note 2 at paragraph 191. See also Tele-Direct, supra note 30.

53
Canada Pipe, supra note 2 at paragraphs 6, 68, 72, 78 and 82.

54
Canada Pipe, supra note 2 at paragraph 64. See also NutraSweet, supra note 24 at 34.

55
Canada Pipe, supra note 2 at paragraph 64. See NutraSweet, supra note 24 at 34.

56
Canada Pipe, supra note 2 at paragraph 67. See also Tele-Direct, supra note 30 at 180.

57
Canada Pipe, supra note 2 at paragraph 70. See also Laidlaw, supra note 29 at 334: ‘While subjective intent may not be a required element in order to find that a given practice (series of acts) is of an anti-competitive nature in this case such exists. It can therefore be taken into consideration as part of the relevant evidence.’

58
Canada Pipe, supra note 2 at paragraphs 71-73. See also D&B Companies of Canada, supra note 15 at 257. See also Abuse of Dominance Guidelines, supra note 8 at 18.

59
Canada Pipe, supra note 2 at paragraph 88. See also D&B Companies of Canada, supra note 15 at 265. However, the concept of ‘superior competitive performance’ is relevant in determining whether a practice is likely to have the effect of preventing or lessening competition substantially in a relevant market, see Competition Act, supra note 1, subsection 79(4).

60
Canada Pipe, supra note 2 at paragraph 72.

61
Canada Pipe, supra note 2 at paragraph 77.

62
Canada Pipe, supra note 2 at paragraphs 77, 80.

63
Canada Pipe, supra note 2 at paragraph 73.

64
Canada Pipe, supra note 2 at paragraph 91.

65
Canada Pipe, supra note 2 at paragraph 88.

66
Canada Pipe, supra note 2 at paragraph 88.

67
Draft Guidelines, supra note 7 at 17-18.

68
Canada Pipe, supra note 2 at paragraph 44.

69
Canada Pipe, supra note 2 at paragraphs 36, 43.

70
Canada Pipe, supra note 2 at paragraph 38.

71
Canada Pipee, supra note 2 at paragraph 42. See Abuse of Dominance Guidelines, supra note 8 at 5. See Concord Boat Corporation v Brunswick Corporation, 207 F3d 1039 at 1055 (8th Cir 2000).

72
Canada Pipe, supra note 2 at paragraph 51. See also Laidlaw, supra note 29 at 344-346. See D&B Companies of Canada, supra note 15 at 267. See NutraSweet, supra note 24 at 47.

73
Canada Pipe, supra note 2 at paragraph 44.

74
Canada Pipe, supra note 2 at paragraph 47.

75
See Abuse of Dominance Guidelines, supra note 8 at 17.

76
Competition Bureau, ‘Strategic Alliances Under the Competition Act’ (Information Bulletin) (1995), online at www.competitionBureau.gc.ca/eic/site/cb-bc.nsf/eng/01671.html.

77
See, eg, submissions by the National Competition Law Section of the Canadian Bar Association and the American Bar Association Sections of Antitrust Law and International Law. Copies of their submissions are available online at www.competitionBureau.gc.ca/eic/site/cb-bc.nsf/eng/03053.html.

78
Sheridan Scott, commissioner of competition, Speaking Notes re Abuse of Dominance Under the Competition Act, Federal Trade Commissioner/Department of Justice Hearings on Single-firm Conduct, Washington, DC, 12 September 2006, online at www.competitionBureau.gc.ca/epic/site/cb-bc.nsf/vwapj/Speech_Final_2006_09_11_EN.pdf/$FILE/Speech_Final_2006_09_11_EN.pdf.

79
Competition Act, supra note 1, subsections 79(1) and (2). See Canada (DIR) v Bank of Montreal (1996), 68 CPR (3d) 527 at 528 (Competition Tribunal) (hereinafter Bank of Montreal): ‘In an abuse of dominance case, the test is whether the consent order will, in all likelihood, eliminate the substantial lessening of competition which is presumed to result from the practice of anti-competitive acts identified in the application.’

80
D&B Companies of Canada, supra note 15 at 278. The circumstances of this case justified the Tribunal’s decision not to issue a remedy order. The Tribunal found that competition in the relevant market would be less effective if an order were issued against the defendant.

81
Ibid.

82
Competition Act, supra note 1, subsection 79(5). Under section 32, there is a provision for compulsory licensing that has never been used in a contested case. That section, however, confers jurisdiction only to the Federal Court of Canada. See also commissioner of competition, Intellectual Property Enforcement Guidelines (September 2000), online at http://strategis.ic.gc.ca/pics/ct/ipege.pdf.

83
Competition Act, supra note 1, subsection 79(6).

84
Competition Act, supra note 1, subsections 79(7), 45(1), and 98.

85
Competition Act, supra note 1, subsection 79(3).

86
Bank of Montreal, supra note 74 at 528. The Tribunal’s first goal in making an order is to restore competition, or in other words, to eliminate the substantial lessening of competition. And if there are alternatives available, then they must adopt the least intrusive course of action.

87
See Laidlaw, supra note 29 at 352.

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